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Private sector help sought for TENs

Just ask passengers on the high-speed train lines that link Brussels, Cologne and Amsterdam to Paris and London whose journey times have been slashed by half an hour thanks to a new section of track between Brussels and the French border.

The completion of this segment, with the help of 140 million ecu of EU investment, marks an important phase in the construction of the PBKAL network linking some of the Union’s main population centres.

“With the completion of the construction of this section of the line, we have taken a big step towards the construction of the high-speed train network across Europe,” said Transport Commissioner Neil Kinnock recently.

More investment is planned in 1998 and 1999 for this key rail link, which will have cost an estimated total of 17 billion ecu by the time it is finished.

PBKAL is one of the 14 projects identified by EU leaders as key priorities for TENs funding at the 1994 Essen summit. Work on 11, including the ambitious Øresund fixed link between Sweden and Denmark, is already under way. Of these, four are nearing completion.

But despite the success of PBKAL and some other Essen projects, Kinnock and his officials warn that not all of the priority TENs are on track.

“The progress of certain projects has not been at the level that was foreseen. Some suffer from a real lack of the necessary public finance to bridge the gap between economic viability and actual financing,” said one official.

Delays have plagued projects such as the Trains à Grande Vitesse (TGV) Sud and TGV Est links which run between Paris, eastern France and south west Germany, and the Brenner tunnel which joins Austria and Italy.

In a bid to speed up completion of projects, the Commission is backing plans to seek more investment from the private sector to supplement stretched public purses.

Kinnock sees the creation of ‘public-private partnerships’ (PPPs) as a key to the completion of cash-starved schemes. “PPPs, we know, cannot only provide an impetus to stalled projects, but combining the skills of public and the private sectors makes for better projects,” he said.

Schemes which could gain from this approach include those at an early stage or ones which have been “progressing slowly” and where contact with member states and financial institutions has indicated the need for added impetus, such as the Brenner tunnel or parts of the TGV Sud link.

The Commission has also taken on board other recommendations by a high-level group of experts set up to look at ways of making PPPs easier to launch. These include moves to clarify public procurement rules and competition policy for transport infrastructure projects.

Another top-level group proposal for the creation of a ‘mezzanine fund’ is currently being scrutinised by the European Investment Bank (EIB), the European Investment Fund (EIF) and potential TENs investors from the private sector.

This would involve a mixture of debt and equity investment in a collection of TENs projects. Financing would be ‘subordinate’ to other investments, meaning the borrower would pay back other loans first in the case of default. This makes the mezzanine funding more risky, but potentially more lucrative for investors as they would need to obtain a greater return to compensate for the extra risk.

“There is nothing to report yet on this plan. However, in my view, we will probably see some proposals in this direction in the first half of this year,” said Andreas Verykios, director of the EIB’s Brussels office. But he added that even if the financing of TENs became less problematic, other issues would still need to be tackled.

“There are many reasons why projects are stuck other than lack of cash. One of the main problems is cross-border coordination over specifications. There is also no separate legal structure for the projects as a whole. These are stumbling blocks,” he said.